An empirical analysis of the NZX's price query system

Abstract

We examine the price query system used by the NZX to monitor compliance with its continuous disclosure regime. We focus on the proposition that "unexplained" price movements detected by the NZX's surveillance systems reflect speculative trading. Examining a sample of price queries where the companies responded with a "no news" announcement, we find evidence of significant abnormal returns immediately prior to the price query and smaller but significant partial reversal of abnormal returns immediately following the "no news" response. We interpret the absence of a full reversal to indicate that prices are based on information-based trading rather than speculative trading.

A review of research on regulation changes in the Asia‐Pacific region

“…The findings demonstrate positive wealth and volume effects with query announcements, and unexplained abnormal returns in the pre-announcement period fail to reverse in the event a firm announces the absence of information to explain the pre-query activity. The absence of reversal is consistent with the New Zealand evidence of Marsden et al (2008), but inconsistent with Australian results in Gong (2007).…”

The impact of company responses to exchange queries on the Australian equity market

“…More importantly, our abnormal return findings report no significant size or industry effects documented in previous studies (see Gong, 2007; and Marsden et al. , 2008).…”

“…Company responses to exchange queries are diverse and range from a simple ‘no’ to a vague array of conjectures that answer the inquiry in an incomplete manner. The extant literature (Gong, 2007; Marsden et al. , 2008) broadly partitions company responses to trading‐induced queries into two distinct groups.…”

“…Marsden et al. (2008) examine the query system employed by the New Zealand Exchange to ensure that listed companies comply with its continuous disclosure requirements.…”

Continuous disclosure compliance: does corporate governance matter?

“…This is a unique regulatory strategy in Australia and New Zealand that the market operator monitors the market and has the power to elicit responses from firms to explain fluctuations and/or unusual trading patterns in their securities. The price queries regime can be seen as a precursor to possible disclosure breaches (Poskitt, 2005;Marsden et al, 2008;Di-Lernia and Aspris, 2011). Whilst price queries have been studied in the context of market reaction to firms' responses (Gong, 2007;Sault, 2011, 2013), the price queries regime has not been substantially examined in the context of firms' continuous disclosure compliance quality.…”